Montenegro: Public says A2A is not in a position to set conditions for future of power utility EPCG

10. March 2015. / SEE Energy News

NGO MANS has previously indicated that the Government never explained why it was not seeking legal definition of technical losses from power utility EPCG company which is managed by Italian partner A2A.

MANS welcomes the adoption of amendments to the law on energy by which it is impossible to norm technical losses legally, because, as they say, with this it has been prevented the attempt of the Government to realize to the detriment consumers the new concessions to Italian partner A2A in the Electric Power Industry of Montenegro (EPCG), who has not managed to reduce losses to a reasonable level.

“The ultimate electricity consumers should not have to be interested in huge EPCG technical losses. Specifically, consumers should only pay reasonable losses which in developed countries amount to five percent, but they pay them at much higher rate which determines the Regulatory Agency for Energy (RAE), arbitrarily and at flat –rate, and only at their expense, in favor of energy companies. Besides RAE has tolerated for years that EPCG has been holding tens of millions of EUR in private banks, rather than to invest in the modernization of the distribution network and thus to reduce the percentage of technical losses to acceptable levels, so, consumers pay guild of this shameless policy through increased electricity bills”, states in the statement.

From MANS state that precisely the Government’s decision to define the technical losses by Energy Law would not be just a reward for EPCG and its alleged strategic partner who have not sufficiently invested in the development of energy networks, but also for regulators to get a legal cover to continue arbitrary assessments of loss rate to the detriment of final consumers.

“MANS has previously indicated that the Government never explained why it was not seeking legal definition of technical losses and assessed that it could be interpreted as a first concession to the Italian company A2A within complex negotiations that would retain ownership in EPCG or it would need to pay off at least 400 MEUR for the entire parcel of shares. Management contract between EPCG and A2A officially expires on April 1st, 2015th, and late last year representatives of the Italian company demanded from the Government the security guarantees for the profitability of the invested capital, the regulatory framework safety, as well as finding a third partner who would build second unit of Thermal power plant in Pljevlja. One of the three key indicators to assess whether the Italians met management conditions in EPCG, precisely are technical losses. In this sense, when A2A entered into the state energy company in 2009th, the losses rate totaled 22.7 percent and the Italian company has committed to reduce them by 11 percent by 2014th, but that did not happen”, writes in the statement.

MANS believes that all this unequivocally shows that “the Italian company is not in a position to set conditions, because it did not met indicators of a management contract, and on the other hand it was justified fear that the Government’s decision would further encourage energy companies to invest more or less in the network modernization, because the law guarantees that citizens will continue to pay enormous technical losses in distribution”.

“In addition, the Government’s decision was controversial due to the fact that EPCG will not be the only electricity producer in the coming years, as a series of small hydro power plants has been currently building, and it has announced the wind farms construction, so the Government’s proposal would introduce the obligation that ultimate consumers pay technical losses of numerous private investors. In this regard, it is sufficient to mention some of the private companies, such as “Bemax” related in the public with Milan Rocen, “Hidroenergija Montenegro” in which the property holds Oleg Obradovic, “Celebic” the construction tycoon Tomislav Celebic from Podgorica, but more recently also “BB Solar” of the prime minister’s son Blazo Djukanovic and “Synergy”, which is associated with the prime minister’s godfather Vuk Rajkovic. MANS also positively assessed step in the Montenegrin parliament that it has not adopted the Government’s problematic solution of technical losses and it is expected that MPs will take the same attitude in possible future situations where the Government proposed a similar or the same solution”, concludes.